Department of Labour Annual Report 2011/12 and its Sheltered Employment Factories

NCOP Public Enterprises and Communication

29 October 2012
Chairperson: Ms P Themba (Mpumalanga, ANC)
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Meeting Summary

The Department was allocated R2.17 billion to achieve its objectives for the year under review, of which it spent R2.017 billion, with a variance of R10.2 million (99.5%). The Department received an unqualified audit report with no emphasis of matter, but with findings on predetermined objectives, procurement and contract management, human resource management and expenditure management.

The major blot on the work of the Department was problems with the Compensation Fund. A conglomeration of factors contributed to some of those problems such as the IT system, technologies and business processes and human resources. The Department needed to step up efforts in turning around the Compensation Fund. A dedicated session with the Committee would be needed to deal with the Fund.

Challenges identified with the Sheltered Employment Factories (SEF) were that those factories remained untransformed and without legal identity, and although they had the capacity to provide goods to other departments, such as furniture and linen to government hospitals, but they did not represent the new demographics post 1994. Those factories needed a turnaround strategy to prevent their collapse and create more employment opportunities for people with disabilities. The Minister had commissioned a study to ensure that the factories had a clear and definable legal status and that they operate as efficient entities, and served to advance the government’s national agenda on the active participation in the economy by people with disabilities. The turnaround strategy arose out of the identification that these factories had the potential to employ people with disabilities and to contribute towards the government’s overall strategy to ensure that people with disabilities had full employment.

SEF’s financial situation led to a decrease in the number of people with disabilities employed by SEF from 3 000 to 926 and consequently SEF’s ability to change the profile of their employees to be representative of South African society. Not much work had been done with regard to transformation.

Members raised many concerns about the SEF. On the Select Committee’s oversight visit to the SEF factory in Port Elizabeth it was found to be very dirty and a health hazard. The Chairperson instructed the CEO to investigate and report back to the Select Committee within fourteen days – the situation was very serious. Other concerns included employees going to work only to find there was no material for them to work with; transport for employees, salaries, medical facilities, and lack of access to infrastructure.

Meeting report

Mr Nkosinathi Nhleko, DOL Director General, briefed the Committee on the Department of Labour Annual Report 2011/12:

Key aspects of the DoL Strategic Plan 2011/12, targets and performance
▪ In terms of strengthening the institutional capacity of the Department, targets and achievements were:
-  Attend to 90% of customer complaints within 14 days of receipt: 98% were resolved within the timeline.
-  34% women employed in Senior Management Service (SMS), 43% youth and 3% people with disability employed in the Department: 38.5% women were employed in SMS, 40% youth were employed in the Department, and 2.6% of DOL employees were people with disabilities.
-  Reduce the vacancy rate to below 8% by 31 March 2012: the vacancy rate was reduced to 7.2%. The Department wished to further improve on that.

-  Finalise 70% of misconduct cases in line with applicable prescripts by 31 March 2012: 79% of misconduct cases were finalised in line with applicable prescripts.
-  Develop and implement an Exit and Services Transfer Plan: the Plan was developed and approved and currently being implemented.

▪ Promotion of equity in the labour market, the target was to inspect workplaces of JSE listed companies and ordinary designated employers to achieved 80% compliance with Employment Equity legislation, the target was to inspect 10 000 workplaces, 60 of the JSE companies, 140 those that were designated, and 140 Procedural. 10 223 workplaces were inspected: 65 JSE listed companies, 218 Designated employers, and 9 940 companies inspected procedurally.

▪ On protecting vulnerable workers, the target was to inspect 130 000 workplaces to achieve 80% compliance rate; 172 300 routine inspections were conducted and 74% compliance achieved.

▪ On the target for 15 000 blitz inspections in targeted sectors, 21 394 blitz inspections were conducted.

▪ 70% of labour related complaints were to be resolved within 14 days; 74% were settled within 14 days.

▪ The target for strengthening social protection was to establish a baseline by conducting at least 20 audits per sector, a blitz per sector and a seminar per year. 722 inspections were conducted in the Iron and Steel Sector; 1003 inspections conducted in the Construction sector; 144 inspections in the Chemical Sector; and 1338 inspections in the Agriculture and Forestry Sector.

▪ Of the target to inspect 200 workplaces to reduce exposure to silica dust by at least 2%, 213 workplaces were inspected. Follow up inspections would continue to determine the level of reduction to exposure. 213 inspections were conducted in Gauteng and 213 nationally.

▪ On the Department’s contribution to employment creation:
- The Department set a target of 600 000 job seekers registered on the Employment Services for South Africa (ESSA) system; 553 883 work seekers were registered on the system.
- 50% of job seekers on the system were to be assessed and profiled within 60 days of registration; 40% were assessed and profiled.
- 450 000 job seekers to be placed / referred to opportunities: 96 505 were referred/placed into opportunities. The DoL provided other work seekers with counselling and employment enhancement and other services.
- Capture 2 000 employers registering vacancies on ESSA: 2 475 companies registered vacancies.
- 1 500 employment agencies registered: 1 162 were registered.
- 20 000 jobs saved through social plan interventions: 15 165 jobs were saved.
- Develop approved policy / legal framework for Sheltered Employment Factories (SEF); target was for legal status and business case to be finalised. Legal establishment provision was part of the Employment Services Bill; National Treasury approved a tender for the service provider for 2nd Phase business case.
- Increased sale of goods from SEF leading to more intake of people with disabilities into SEF. The target was 30% in sales leading to 500 more people with disabilities employed in SEF subject to government departments placing 30% of their orders from SEF. Only 0.6% increase in sales was recorded. No additional people with disabilities were employed. Government departments placed only 1.47% increase in orders.
- 120 companies assisted to facilitate constructive dialogue between social partners, managers and workers, to improve productivity; 275 companies were assisted.
- Five productivity brochures and one electronic newsletter to be published during Productivity Month and best performing organisations awarded; 3 brochures were printed and 8 electronic newsletters published. One national productivity award function and five regional award functions were held.
- 3000 SMME managers assisted to manage intellectual property matters: 2842 managers were trained.
- On the need to conduct a research study on the impact of municipal programmes on SMMEs (to do with productivity and jobs created); a research report was completed and four seminars conducted.
- On the number of expenses approved by Compensation Fund and paid; outstanding claims from 1999 to September 2011, the total outstanding R20.9 million received from National Treasury; additional allocation of R26 million received from National Treasury; total of R36 million transferred to the Compensation Fund from 1999 to March 2012; outstanding claims to be paid to Compensation Fund R1.2 million.

Promotion of Equity in the Labour Market.
▪ On the target for promulgation of amendments to Employment Equity Act and its Regulations, NEDLAC negotiations on the Employment Equity Amendment Bill were postponed to commence in April 2012 due to prolonged negotiations on the Labour Relations Act (LRA) and Basic Conditions of Employment Act (BCEA) Amendment Bills.

▪ On the Code of Good Practice and Technical Assistance guidelines on HIV and AIDS to be reviewed and amended, the Code on HIV and AIDS and the World of Work were reviewed and finalised.

▪ On assessing income differentials to determine race and gender disparities in salaries, of the target of 60, 58 was achieved.

Protecting Vulnerable Workers.
▪ On the target to have the amended BCEA promulgated: bills were approved by Cabinet and submitted to Parliament information sharing sessions conducted countrywide and public hearings were held.

▪ On the review of sectoral determination the Department’s target was to publish an amended Sectoral Determination (SD) for Civil Engineering, Taxi, Contract Cleaning, Domestic Workers, Wholesale and Retail, and Forestry industries: Five Sectoral Determinations were reviewed for Taxi, Contract Cleaning, Domestic, Farm Worker, and Forestry Worker industries.

▪ On the need for strengthening bilateral and multilateral relations, targets and achievements were:
- Compliance with Article 19 and 22 of the ILO Constitution were met: Two Article 19 Questionnaires on unratified Social Security Convention and Six Article 22 reports on ratified Conventions submitted to ILO.
- Develop briefing documents on South African positions on the agenda items for
African Regional Labour Administration Centre (ARLAC), African Union Labour and Social Affairs Commission (AU LSAC), ILO Governing Body and International Labour Conference, SADC Employment and Labour Sector (ELS): SA delegations participated in the annual meetings of these multilateral bodies. South Africa successfully hosted the 12th African Regional meeting.
- South Africa’s Decent Work Country Programme implemented: regular meetings of Steering Committee and Technical Implementation Committee were held to monitor implementation of projects as agreed.
- The need to enter into MOUs with respective countries and from time to time review and sign those: review of the memorandum of understanding with China finalised and awaiting signature.

▪ On the Promotion of Sound Labour Relations there was a need to extend collective agreements within 90 days. The target was to have 18 collective agreements published within 60 days of receipt. There were 24 collective agreements with an average turnaround time of 57 days.

▪ On the decision to register new labour organisations within 90 days, 144 labour organisations were registered with an average turnaround time of 104 days.

Monitoring the impact of legislation.
DOL aimed to develop, publish and disseminate four Annual Labour Market Review Reports. This was achieved and included: Industrial Action Report 2011; Annual Labour Market Bulletin; Annual Administrative Statistics Report; and Job Opportunity and Unemployment in the SA Labour Market.

The Department targeted implementation of the Research, Monitoring and Evaluation (RME) agenda 2 be continued with the following projects: Evaluation of the National Skills Development Strategy (NSDS) II; UIF non-compliance in the taxi, domestic and catering sectors, and assessment of the registration, recruitment and selection services in Employment Services of South Africa (ESSA). Projects completed and disseminated through research seminars were: Evaluation of the NDSD II; UIF Client satisfaction survey; UIF non-compliance in the taxi, domestic and catering sectors, and Assessment of registration, recruitment and selection services in ESSA

Budget Allocations and Utilisation per Main Division of the Vote
Mr Bheki Maduna (CFO) briefed the Committee on the financials and audit findings. The Department was allocated R2.17 billion, of which it spent R2.017 billion, with a variance of R10.2 million (99.5%). The Department received an unqualified audit report with no emphasis of matter, but with findings on predetermined objectives, procurement and contract management, human resource management and expenditure management.

▪ On predetermined objectives, the Auditor General found that performance targets were not specific for
Inspections and Enforcement Services (IES) and Public Employment Services (PES) and performance indicators were not well defined (IES).

▪ In terms of procurement and contract management:
- Goods and services of a transaction value above R500 000 were procured without inviting competitive bids;
- The Accounting Officer did not report deviation from normal procurement processes to National Treasury and the Auditor General within the specified time; and
- Employees of the Department performed remunerative work outside their employment without written permission from the relevant authority.

▪ For Human Resource management, funded vacant posts were not filled within 12 months and vacant positions in the Department were not advertised within six months.

▪ On Expenditure Management, contractual obligations and money owed by the Department were not settled within 30 days.

Sheltered Employment Factories (SEF)
Mr Silumko Nondwangu, SEF chief executive officer, briefed the Committee on the challenges and the potential that some of those entities had in terms of transformation of race, gender, and employing a number of people with disabilities.

The Department inherited the SEF from the previous government. Challenges identified were that those factories remained untransformed with no legal identity, and even although they had the capacity to provide goods to other departments, such as furniture and linen to government hospitals, but without the new demographics post 1994 those factories would either have collapsed or would not have created employment opportunities for people with disabilities.

The Minister commissioned a study to ensure that the factories had a clear and definable legal status and that they operated as efficient entities, and served to advance the government’s national agenda on active participation in the economy by people with disabilities. The background to the turnaround strategy arose out of the identification that those factories had the potential to employ people with disabilities and to contribute towards the government’s overall strategy to ensure that people with disabilities had full employment.

SEF had 12 factories in seven of the nine provinces; only Mpumalanga and Limpopo did not have a facility. The turnaround strategy planned to establish factories in Limpopo and Mpumalanga, after stabilising existing factories within the next two years. The turnaround strategy consisted of:

▪ The Employment Services Bill referred to Parliament made reference of SEF’s legal framework in Chapter 6 and dealt with the establishment of the SEF as a Protected Employment Enterprise (PEE), and when enacted would ensure that those factories had a legal identity.

▪ The SEF Option Model currently being considered and implemented was an option to ensure stabilising the existing entities in terms of management, generating income, transformation, having legal identity, and to ensure that existing factories had the potential to expand to factories in Mpumalanga and Limpopo. An implementation plan was being developed together with Treasury over the next two years.

In terms of Employment Equity, SEF’s financial situation led to a decrease in the number of people with disabilities employed by SEF from 3 000 to 926 and consequently SEF’s ability to change the profile of their employees to be representative of South African society. Not much work had been done with regard to transformation in the factories; SEF race and gender profile exhibited racial and gender disparities. It was planned that issues of race and gender would be turned around in the factories. Orders from government departments were inadequate to ensure the implementation of an employment equity plan. Factories employed about 1 100 employees out of a potential to employ about 3 000. Racial demographics were very skewed as a result of SEF’s history. The breakdown with regard to racial groups was a very bad picture that management undertook to address within the next two years.

The twelve factories were situated in Pretoria, Springfield, Rand, Ndabeni, Epping, Pietermaritzburg, Durban, East London, Port Elizabeth, Kimberley, Bloemfontein and Potchefstroom. The total factories had the manufacturing capability to produce products in the fields of furniture; textiles (garments, bed linen, protective clothing, hospital and surgical garb with printed or embroidered logos); metal work, leather work, canvas work, book binding, and screen printing (printing onto promotional products such as T-shirts).

Human Resources – Employment Status
Mr Nhleko referred to the vacancy rate, which was at 7.2% overall. DOL had areas of progress but there were also areas where it was not progressing well. The Auditor General’s report had found some areas of regression, which was very concerning. Action plans were put in place to monitor progress and ensure effective oversight responsibility was being exercised. The Department received its second unqualified audit opinion consecutively.

SEF was an area that required special attention and oversight. It was gratifying that the SEF obtained its first unqualified audit opinion. A lot needed to be done to ensure the viability and sustainability of the factories. Issues raised by the Auditor General were being corrected and improvements in the control environment were an ongoing process.

Moving forward centred on ensuring a level of service delivery. The Department would like to appear before the Select Committee to deal with the issue of currently conducting a study on the accessibility of labour centres, and also dealing with the decentralisation of the Compensation Fund. The Department needed the support of the Committee. There were legislative areas that would inform the legislative programmes of Parliament – the Basic Conditions of Employment Act and the Labour Relations Act, and the Employment Services Bill – the Department needed the Committee’s support in those areas.

Discussion
Ms L Mabija (ANC, Limpopo) asked why were external service providers appointed to do the work that officials were appointed to do? Why could the implementers of programmes not do a situational analysis, options models and implementation plan? Her concern was in terms of value for money.

Mr Nhleko responded that in the majority of cases it was outsourced because the officials did not have sufficient time to do those things. He noted caution should be exercised so that there was a balanced approach and it should not be the first preferred option.

Mr R Tau (ANC, Northern Cape) was very impressed with the manner in which the Department had structured the presentation. He was concerned about the number of vacancies and asked when those vacancies would be filled?

Mr Nhleko responded that the Department had stepped up efforts in the filling of vacancies but the Department had yet to assemble a team that involved two Chief Directors from the provinces to design an approach for filling a number of those vacancies within a short space of time. It was possible to do so. He undertook to continue to brief the Select Committee on progress made.

Mr H Groenewald (DA, North West) congratulated the Department on receiving an unqualified report.
On oversight visits to the Sheltered Employment Factories, he noted that the quality varied in the different factories. The turnaround strategy was very important but the Committee found that some factories did not have material to work with. What were the Department’s plans to ensure employees were not without work because they had no material?

Mr Groenewald expressed concern about the fraud that took place in the factories and asked what control measures were in place?

Mr Groenewald noted that ever everything was centralised in Pretoria, he suggested administration could be decentralised.

Mr Nhleko noted the point. Some of the issues would have to be reviewed and looked at. He did not know the reasons for moving away from decentralisation but suspected that it was a capacity matter. 

Mr O De Beer (COPE, Western Cape) noted that the Department had received an unqualified report for some years, but the same Auditor General findings came up every year. There were still problems with procurement procedures, which was a matter of systems, and still matters of wrongful remuneration paid. This raised the question of internal systems and internal auditing.

Mr Bheki Maduna responded that was true. They were residual issues in the sense that the Auditor General found them not substantive enough to qualify the report but the Department still had to deal with them. The challenges he had was that the issues went beyond financial management. On the issues of procurement, asset management and expenditure management, the Department acknowledged that those matters were not for finance alone but one had to designate officials throughout to deal with those issues.

On procurement, DOL was going throughout the country educating managers in the provinces that sat on procurement committees. As prescribed by the Preferential Procurement Policy Framework Act (PPPFA), there must be a bid adjudicating committee. Those managers had to be aware of these provisions.

Mr De Beer asked what was the reason for the decline in the Compensation Fund.

Mr Nhleko responded that the major blot on the work of the Department was that of the problems of the Compensation Fund. A dedicated session would be needed to deal with the issues of the Fund; a conglomeration of factors contributed to some of those problems. There was an IT system issue, technologies and business processes applied that had to be looked into. There were also Human Resource issues. The Department did need to step up efforts in turning around the Compensation Fund.

Mr De Beer said he regularly raised the issue of enforcement agencies and retaining the inspectors. They always left because of the salary. He asked if training of recruits spoke to the use of Justice Colleges because there was a link between the two in terms of dealing with case management and case flow.

Mr Virgil Seafield (Chief Director: Inspection and Enforcement Services) responded that there may be similarities in the principle but the process was not the same. The Department was in consultation with the Justice Colleges to train some of the Department’s inspectors in different provinces so that they could be used as trainer models to train other inspectors. The Justice College was structured to provide a service to the Justice system and not to other departments. Therefore DOL had been given the scope to be able to train its inspectors.

Mr De Beer also felt that the vetting process when recruiting people took too long. He asked what was the retention strategy for personnel in the Department.

Mr Nhleko responded that staff retention was not a problem for the Department of Labour only; it was a public service issue. If an employee wished to leave because of abetter salary elsewhere, there was little or no room to retain that person because salary level was dealt with somewhere else in the public service. That did not mean that the Department should not be thinking of a retention strategy because a retention strategy could be monetary or non monetary or both.

Mr Seafield said, on the retention of inspectors, that during the Gautrain construction, DOL lost inspectors to the Gautrain development company because of the skills they possessed. There would always be that anomaly that skills would be poached. The other side of the coin was there were people out there in the open market who understood enforcement and the Occupational Health and Safety culture due to DoL.

Mr Z Mlenzana (COPE, Eastern Cape) noted that the Select Committee had made the stabilising of the SEF a priority and he was happy listening to the SEF CEO’s report on its stabilisation plan by 2014.

Mr Mlenzana thanked the Department for timeous circulation of the briefing documents. With regard to promotion of work produced by SEF that could not be achieved due to capacity, he suggested it was due to the imbalance of the various managers. On visiting the factories, it was found that in some, documentation was in place but in others there was nothing. It seemed the managers did not understand that they were running a business or understand how to run a business.

Mr Mlenzana said some of the employees at SEF were mentally disturbed; he noted there was a mini clinic or sick room, but were there professionals such as a psychologist and an occupational therapist?

Mr Nondwangu responded that most of the factories employed psychologists but because of salary demands of psychologists that had to be discontinued. In some cases, nurses came on a quarterly basis but that was not consistent.

Mr Mlenzana asked why supply chain management was centralised? What were the advantages and disadvantages of centralisation?

Mr Nondwangu explained that in the previous management there was rampant looting at the factories and the intention of introducing centralisation was to minimise that looting. It was also about creating norms and standards applicable to all the factories so that a group identity was developed. Production requirements, production planning and the distribution of orders took place at Head Office and equitable amounts of raw materials distributed to the various factories.

Mr Mlenzana referred to the Auditor General’s report and noted that there was an increase in non-compliance with regulations and supply chain management processes, human resource management and contract management. Where was the risk management?

Mr Nhleko responded that DOL had taken note of those particular issues, including those that were recurring, which was where the Auditor General said there appeared to be some areas of regression.

Mr Prince Zulu (IFP, KwaZulu-Natal) said DOL must mention if there were problems with the SEF so that the Chairperson could assist in that regard.

Mr M Jacobs (ANC, Free State) asked for clarification on the MOUs.

Mr Les Kettledas, Deputy Director-General Labour Policy and Industrial Relations, clarified that the MOU with Lesotho dealt with issues of labour dispute resolution, social dialogue, social security, and an issue around compensation for occupational injuries and diseases of Lesotho citizens working in South Africa. That MOU was currently under review because it had come to an end. There was a delay because of factions in Lesotho and there was now a new Minister of Labour.

The MOU with Namibia was signed in 2008 and also dealt with dispute resolution, social dialogue, productivity, labour inspections and employment services, employment equity and labour law. When the issue of labour brokers was being discussed in South Africa, Namibia already made amendments to legislation about labour hire, which was similar to labour brokers, and there had been engagement as to what the approach of the different countries was on that issue. That was also currently being reviewed.

The MOU with China went back to 2003. Issues covered were social security, human resource development, reemployment programmes to social plans, and labour market institutions and policies. DOL was currently in a process where there was an exchange of a draft MOU, which the two ministers would sign as soon as the legal processes were completed.

The MOU with Cuba also went back to 2003 and covered issues of employment, social security, and occupational health and safety. South Africa had very good cooperation with Cuba where in September 2005 a team of 20 employment services practitioners from our provinces went to Cuba to be trained on the Community Development Worker system. Also in 2011 a team of 20 inspectors from different provinces undertook a visit to Cuba for exchanges on inspection services. Two teams of inspectors went to Cuba to undergo training. The way in which the Cubans worked was when people were sent there to undergo training, they were given projects to implement when they returned to their home country, and the instructors that trained them in Cuba came here to do an evaluation.

Mr Kettledas continued that what happened with most of those MOUs, in the areas of social security and social dialogue, for example, and dispute resolution, they sent delegations of officials to South Africa to go to the CCMA to look at dispute resolution, to NEDLAC on how we conducted social dialogue, and in regard to social security, undertaken visits to the Compensation Fund and to the UIF to understand how we implemented social security in the country, and more generally how the DOL functioned and operated. There was an exchange of materials as well to assist in development of their policies in those areas of cooperation.

Mr Jacobs had a problem with so many acronyms in the presentation, which made it difficult for a layperson to follow. He referred to the findings on procurement and contract management, and not inviting competitive bids. These were all issues that could have been avoided and must be addressed. He was not satisfied; DOL must come up with a clean audit.

Mr Nhleko acknowledged that around issues of contract management DOL had been found wanting and was one of the priority areas to be addressed.

Mr Jacobs was very impressed with the Sheltered Employment Factories; he felt they had potential. They could be self-reliant, employ more people and become more competitive. Skills could be acquired and good quality products produced. He suggested using those factories to train others; for the youth to get skills of welding, screening and sewing.

Mr Jacobs was concerned with the issue of centralisation of procurement, how would DOL then monitor that. He asked why the Department of Public Works was not being used to maintain the buildings. He was also concerned that transport for the employees had not yet been taken care of. He raised the question of minimum wages. In some instances employees earned about R3 000 but paid R1 200 for transport. He suggested standardisation of management; the situation should not be allowed where they operated differently in the different factories. A lot of improvement was needed in the SEF. Parastatals depended on government bailing them out time and again. If run correctly, the SEF could be self-reliant and increase the employment of disabled people.

Mr M Sibande (ANC, Mpumalanga) also stressed the Auditor General’s findings on supply chain management and contract management. Risk management and systems were not talking to each other.

Mr Sibande was impressed that DOL had visited the Johannesburg Stock Exchange (JSE); he suggested it also visit Parliament and look at its labour practices. He had several times been given a secretary from a labour broker, which was a contradiction, and if there were no follow up those challenges would remain. What mechanism was in place to monitor labour brokers, which was where the conflicts started?

Mr Kettledas responded that was more of an inspection issue at legislative level. The LRA Bill was currently before the Portfolio Committee. It had concluded a clause-by-clause consideration of the LRA. Once they had adopted the BCEA and the LRA Amendment Bills, those would go to the National Assembly and subsequently to the NCOP.

Mr Seafield added that the legislative amendment would deal effectively with the issue and would seek to put in place a regime to deal with labour brokers. Labour brokers would be dealt with similarly to any other employer so there was no distinction whether you were a labour broker or an employer in terms of inspection.

Mr Sibande asked for clarification of the additional allocation of R26 million received from Treasury. The budget allocated was R2.7 billion. Was that R26 million included, and if not, why not?

Mr Maduna clarified that DOL was responsible for paying the Compensation Fund in cases of injury of on duty of public servants. The amount allocated to DOL for that was not enough in terms of the claims the Compensation Fund was putting through, so DOL had to request an additional allocation of R26 million to cover the backlog. It was an once-off amount. Subsequent to that, Treasury increased the allocation to cover injury of on duty public servants.

Mr Sibande asked what role social workers played in the SEF? Most of those employees, particularly black people did not have shelter. He was also concerned about access to the SEF structures. On one of the Committee’s oversight visits, they had noted that people with disabilities were contained in a certain area because there was no lift or access to any other area. The infrastructure was also very old and dirty.

Mr Nondwangu undertook to go to Port Elizabeth to investigate and he would report back.

The Chairperson was surprised that Mr Nondwangu had not visited Port Elizabeth since the Select Committee’s oversight visit. The factory was in a shocking state and was not being cleaned.

Mr Nondwangu replied that about two months before he had gone to the Port Elizabeth factory, not as a result of the Committee’s oversight visit but because of managerial problems. The factory manager was replaced. Mr Nondwangu undertook to return and ensure that everything was in order.

The Chairperson requested Mr Nondwangu investigate and report back to the Select Committee within fourteen days – the situation was very serious.

Ms Mabija said the CEO had promised to bring such a report to this meeting; he must not make empty promises.

Mr Nondwangu apologised; he would provide the report. Issues raised by Members about administration at the factories would be attended to.

Mr Sibande supported the comments of Mr Jacobs on transport and salaries. He was concerned that the factory in Durban had no materials; the employees went to work but had nothing to do because of this. Over and above income from government, who monitored the income those factories received from the sale of the goods they manufactured?

Mr Maduna responded that there was a unit that monitored all public entities in terms of compliance. On the operations side, the SEF would need their own capacity to do their finances. DOL advised on specific issues that came to its attention that were problematic. They had to produce, they had to sell, but one of the big elements was to collect the money from goods sold. Currently there was a huge amount to be written off for government entities that SEF had sold to but who had not paid for the goods. The collection part of the operation needed to be improved and DOL would advise on that.

Mr Sibande noted with concern that routine labour inspections were conducted and 74% compliance was achieved. What did DOL do about the people who continually failed to comply?

Mr Seafield explained that compliance was the responsibility of the employer. On inspections, it was a case of picking up what level compliance was in the labour market, which was the figure in the presentation. The three areas where there were problems were the Western Cape, Limpopo and KwaZulu-Natal. DOL’s approach was to deal with those provinces with high levels of non-compliance and also to look at how it could structure the enforcement regime to have greater levels of compliance across the country.

Mr Sibande was also concerned that seasonal workers were taken on as cheap labour. He stressed that people must be disciplined where necessary because if not, they would undermine the good work being done in DOL.

Ms Mabija was happy with the unqualified report but on the ground, it was a different story. In a meeting in the Northern Cape, the CEO was requested to visit the institution in the Northern Cape. He had promised to do so and bring a report on it to this meeting.

Mr De Beer said when the DOL met with the Committee the previous year, the Director General's report concurred with the Select Committee’s findings about poor morale due to the non-availability of resources and training at Labour Centres. He requested an update on that.

The Chairperson noted the Director General's visit to provinces and asked whether the resources were now available at those Labour Centres? Her constituency office was next door to a Labour Centre. There were no telephones. That office was now to be open more than two days a week but people had to have the resources to be able to work. On an oversight visit to the Eastern Cape, it was noted that an office outside Port Elizabeth was also in need of resources.

Mr Nhleko responded that DOL needed to be proactive in identifying challenges to report on before the Select Committee.

The Chairperson said DOL should have that information available.

Mr Nhleko said DOL undertook the visits. Out of the visits, it had developed the Project Shanduka [enhancing speedy service delivery and ensuring resources at the coalface of delivery]. This was a systematic response and reaction to the issues raised when the Director General and his team visited the various provinces. Work was being done at that level and it was hoped that within the next two to three months, DOL could be in a position to appear before the Select Committee to brief it about progress registered there. A number of issues arose when visiting the provinces and the question was how to deal with these and respond to them.

Mr Nhleko requested an opportunity to appear before the Select Committee to brief it on some of the projects.

The Chairperson said after visiting all those SEF, the Committee wished to have a debate in the House about them, which was why the Committee had emphasised that the CEO and DOL put their heads together to ensure that those factories were taken care of. It was pitiful to see, such as in Pietermaritzburg, that the people had nothing to do. An employee said he was paid R60 per day to go to work but when there, there was nothing for him to do. She asked the CEO and DOL to look into these problems. When the Committee spoke in the House it would be talking to the public at large and it must have some strategies. If the existing factories were not well resourced, how then would they be able to expand to Limpopo and Mpumalanga? SEF should also be expanded within each province. The Committee would be having such a debate in the NCOP Chamber because it wished to see that something of value happened during its five-year tenure in Parliament.

Regarding first aid in the SEF, Pietermaritzburg was excellent and had a small clinic, but in the Western Cape even the medicines in the first aid kit had expired. Some of the employees in the factories were mentally disturbed and became aggressive when frustrated, but there were no bandages. Practicalities must be considered.

The Chairperson asked why SEF had achieved only two of its planned targets for the year; 78% of their total planned targets were not achieved?

On the training of SMMEs, 2 842 managers were trained, she asked for a breakdown in terms of gender and province.

Mr Nhleko appreciated the constructive engagement and input from the Select Committee, and the interest taken in the SEF and the subsequent visit. On the offer of assistance, the Committee’s oversight role was assisting DOL.

At the beginning of the year, DOL had identified the SEF as a priority project. The SEF was founded in the mid forties with a specific mandate. The question was how to review that mandate so that it talked to where the country currently was. SEF was designed post Second World War. The country was now in the era of democracy, peace, reconstruction and development. DOL had to consider what it wanted to use the SEF for, and three important areas had to be looked into:

- How SEF contributed to the overall effort of employment creation;
- How SEF had to deal with the issue of skilling people. Agencies in this country used to focus on the question of internship, skills upgrading and skills development. SEF had to come into that kind of space. But sight could not be lost about the issue of the disabled and people living with disabilities; there had to be plans for that. There was a lot of potential to turnaround SEF.
- The issue of capacity of the people to manage SEF was dependant on how SEF eventually turned out and how it was structured. The manner in which it was structured would inform the type of character and quality of people that SEF would attract as managers to manage those institutions.

Mr Nhleko concluded with DOL’s undertaking that it wished to return to brief the Select Committee on a number of critical areas. There would need to be a session on SEF, also a session on the priority projects, the Shanduka project, and responses to some of the questions about the Labour Centres.

The Chairperson thanked the Director General and his team. Members appreciated the manner in which the presentation was formulated. DOL would be accommodated in the first term programme for 2013 to deal with the Shanduka project, the Compensation Fund, and other specific issues.

The Chairperson thanked everyone and reminded the SEF CEO of the Select Committee’s plan to have a debate on the SEF in Parliament.

The meeting was adjourned.

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